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At TSIA, we've recently received a lot of questions from our members regarding the typical organizational models tech companies are using to set up cloud or XaaS businesses alongside their traditional consumption models. To get a bit more insight on this topic, we conducted a TSIA Quick Poll where we asked members of our Professional Services community to share their experiences in this area, resulting in us receiving detailed responses from 56 companies. Though brief, the survey yielded some surprising and interesting results. In this blog post, I'd like to share some survey highlights with you.  

About Who Responded to This TSIA Quick Poll for Professional Services

The first thing the survey did was narrow down the sample to companies that had the following three attributes:

  1. They have on premise legacy offers (hardware or software).
  2. They now sell subscription offers.
  3. They attach professional services to that subscription offer.
professional services attributes.  

(Click image to enlarge.)
Source: TSIA Professional Services Quick Poll.

Nearly 63% of the respondents indicated that they satisfied all of the above requirements; a clear indication that the vast majority of TSIA's Professional Services (PS) member companies are in the midst of a transformation to the cloud. To shed light on the nature of this transformation and get to the heart of the matter, we posed a handful of targeted questions:

  • How fast are your products and solutions growing across your traditional versus cloud products and services?
  • What is your basic organizational and operational approach to executing services delivery across traditional and cloud solutions?
  • How does financial performance compare between your PS offers focused supporting your traditional versus cloud portfolio?

While the full results of this survey are exclusive to the 56 study participants for the time being, I'd like to provide some specifics on one of the items above and offer some general comments about the overall findings and implications of this TSIA Quick Poll.

Annual Revenue Growth Rate

As mentioned above, one of the things we asked respondents to do was tell us about their comparative annual revenue growth rates across the following categories:

  • Subscription products.
  • Professional services around subscription products.
  • Professional services around traditional on premise products.
  • Traditional on premise products.
professional services growth rate  

(Click image to enlarge.)
Source: TSIA Professional Services Quick Poll.

Not surprisingly, cloud product and cloud professional services growth are higher than traditional product or professional services growth. However, it's very interesting that traditional tech product professional services growth is dramatically outpacing product growth. This also validates a trend we've been sensing for some time; namely that professional services is a revenue plug when product revenue is under pressure. But frankly, it's also somewhat alarming that growth for professional services around subscriptions is far slower than the growth of subscription products themselves. As long as subscriptions require services for deployment or optimization, this sort of disparity will eventually become a problem.

A Summary of the Findings

Overall, this TSIA Quick Poll yielded some very useful results, including those discussed above on revenue trends. Clearly, most TSIA members within our Professional Services discipline (in other words, most technology companies) are in the midst of some level of transformation to the cloud.

While the difference in cloud and cloud PS growth relative to traditional products and traditional PS is not surprising, the fact that cloud PS revenue growth so dramatically lags cloud subscription growth is a contradiction that will cause problems down the road.

Technology companies need to find a zone for cloud professional services that scales with the typically rapid growth experienced by the subscription business, while not abandoning or jettisoning their core PS capabilities, which still remain the lion's share of their delivery. 

Learn More About This Survey and Other TSIA Research

Thanks to everyone who participated in this survey! If you're already a member of TSIA's Professional Services discipline, the full results of this TSIA Quick Poll will be made available to you later this fall. Not a member yet but want to learn more about how TSIA can help your technology services business be the best it can be? Request more info here or check out our Free Resource Center for a sample of the much larger body of research, business frameworks, and success strategies we provide as part of your membership in any of our focus areas.

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Bo Di Muccio

About Author Bo Di Muccio

Bo Di Muccio, Ph.D., distinguished vice president of Professional Services research and vice president of TSIA advisory delivery. He is also the chairperson of the TSIA Professional Services Advisory Board. Using his nearly 15 years of experience in technology industry research, analysis, and consulting, Di Muccio develops and delivers research and advisory programs that help some of the world’s leading technology companies build and optimize their professional services business.

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